Treasuries – Most Oversold since 2009, But Conflicting Signals Grow

While contemplating a couple of different blog posts today, Gary Morrow’s post from This Week on Wall Street (TWOWS), pretty much made the decision, as to what to write about tonight.

Gary and I know each other from our days as co-contributors at Jim Cramer’s, (or I guess what it is known as today as “The Street”), through most of the last decade. I think Morrow is a very good technician across a number of different time frames. A former CME trader back in “the day” when the CME currencies were active, Gary cut his chops in open-outcry trading at the CME, where technical analysis rules the roost.

Some small positions in the TLT and the AGG were put on to the long side today for clients, given the oversold nature of interest rates.

However, another post from Doug McKay (Gary’s partner at TWOWS) here on GLD is also worth noting to readers.

On the longer term chart (not shown) the GLD looks like it is forming a longer base.

The “why” of gold’s suggested bottoming action is as important to me as the base itself, and I wonder if it isn’t due to some possible signs of inflation emerging.

WalMart’s recent wage hikes, along with TJ Maxx and McDonald’s following suit, were one important indicator that the long trend towards disinflation could be ending. It is a guess of course, but I bet the Fed pays more attention to “demand-pull” inflation than what is traditionally seen as “cost-push” (i.e. commodity) inflation, but that is one opinion. (Long WMT, small position in MCD owned since 2003).

With so much retail sales data so weak, the jobless claims strength is puzzling, but the strength in claims continues unabated.

Finally, the Employment Cost Index (ECI) recent strength is worth noting. Here is the link to the Business Insider story and ECI graph that caught my eye shortly after its release on April 30, 15.

Given Morrow’s note on the oversold nature of Treasuries, if the TLT does rally, but it can’t push through $123.82, or the 200-day moving average, that could be it for record low rates.

Or maybe not… Frustration abounds.


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